Consumer Law & Policy Blog

CFPB Issues Arbitration Rule

Here.

Ira Rheingold Op-Ed on Wells Fargo and a Different Arbitration Dispute

by Jeff Sovern

Different, that is, from arbitrations over the unauthorized accounts, about which we have reported (Wells has agreed to set aside its arbitration clause in the unauthorized account dispute and settle the claims in a class action; court approval is pending but seems likely). Ira's piece, titled Courts, Regulators Must Stop Wells Fargo’s Rigged Arbitration System appears in the Morning Consult. Excerpt:

The 11th Circuit Court of Appeals is scheduled to hear arguments in August over Wells Fargo’s abusive overdraft fee practices. Not content to rake in the profits at up to $35 per fee, banks like Wells Fargo began a deeply cynical and abusive practice: By re-ordering a customers’ transactions, banks could ensure the largest-dollar items were charged to your account first, resulting in additional fees when lower-dollar transactions, which had been completed earlier, hit your empty bank account. Instead of being charged one overdraft fee, you would be hit with several * * *

* * *

Wells Fargo, on the other hand, refuses to reimburse its customers. Instead, the bank has spent years trying to force its customers into a complicated arbitration process, which would in reality provide little chance of recovering the money that was stolen through these overdraft fees.

 

 

 

The House Appropriations Bill Is Much Worse for Consumers Than Originally Reported

by Jeff Sovern

We posted yesterday about the House Appropriations Bill. I haven't studied the bill, but on a quick look, it contains a number of objectionable provisions from the Financial Choice Act (already passed by the House), including repeal of the CFPB's power to regulate arbitration and payday lenders and to block conduct on the ground that it is deceptive, unfair, or abusive (UDAAP authority). It also eliminates the Bureau's supervisory authority.  More from Law360's Evan Weinberger here. By attaching these provisions to the appropriations bill, which is very likely to pass in at least some form, their supporters increase their chances of getting something through Congress, even if the Financial Choice Act fails of passage.

Report Finds Some Arbitration Providers Not Complying with California Arbitration Reporting Law

Here. From the Executive Summary:

32 firms appear to be offering consumer arbitration services in California. Of those, only 11 firms follow the substantive requirements of §1281.96(a) , and of those, only three firms can be said to evidence robust and full compliance with the statutory regime, including §1281.96(b)’s formal requirements as to format, timing and depth of reporting.

Some 12 firms self-reported to us that they were not covered by §1281.96, either due to not performing arbitration services, or for other reasons. 9 firms did not respond to our emails or phone calls; they may not be in business any longer.

 

Can the California Anti-Arbitration Bill Survive FAA Preemption?

by Jeff Sovern

Reuters reports that the bill has passed an Assembly committee, and is expected to pass the Assembly in August (the state Senate has already passed it).  Here's the part I don't understand: if California enacts the law, how can it avoid being preempted under the Federal Arbitration Act, as SCOTUS has interpreted it?  Or is the goal here something else?  I would be grateful if someone could post a comment answering those questions.

LA City Attorney: Why we can’t lose the Consumer Financial Protection Bureau

by Jeff Sovern

Some congressional Republicans have said that the CFPB was asleep at the switch when it came to the Wells Fargo unauthorized account scandal, and that it just piggy-backed on the LA City Attorney, which was the first governmental office to bring a case against Wells for the accounts.  But now the LA City Attorney himself, Mike Feuer, says that it is "especially outrageous for Republicans to latch onto the Wells Fargo fake accounts scandal to back up their claim that the CFPB needs a drastic overhaul." In his op-ed, Feuer also says:

Nor should the CFPB be emasculated in the multiple ways the House bill threatens, from eliminating the bureau’s ability to target deceptive and abusive practices — predatory lenders, have at it! — to erasing its authority over payday lenders.

The Financial CHOICE Act would effectively prevent the CFPB from enforcing any consumer protections within another regulator’s jurisdiction. The legislation would rob the public of the chance to review consumer complaints lodged with the Bureau—data my office relied on in our investigation of Wells Fargo. The House bill would eliminate the CFPB’s authority with respect to those pernicious arbitration clauses that Wells Fargo and other corporations impose to block customers from airing grievances in court. Buried in the bill is a provision giving targets of CFPB investigations the ability to seek court orders setting aside demands for information about potential abuses.

Alan Kaplinsky Reports Rumor that CFPB to Issue Arbitration Rule By July 31 and Cordray to Step Down This Year

Here, in the Consumer Finance Monitor.  Alan also notes that the rule can be blocked by congressional invocation of the Congressional Review Act, litigation, or, if Cordray does indeed step down, by a new Trump-appointed director.

LA Times's David Lazarus: Trump wants to deny nursing-home residents and their families the right to sue

Here.  It's another excellent column.  Excerpt:

Let’s say your elderly parent was neglected or abused in a nursing home. In the past, your only recourse might have been arbitration, rather than going to court.

But thanks to a rule put in place last fall by the Centers for Medicare and Medicaid Services, nursing homes that receive federal funding — which is most of them — could no longer include so-called mandatory arbitration clauses in their contracts. * * *

Now the Trump administration is trying to get rid of that protection.

Under-new-management CMS released a proposed rule last week that would rescind the earlier rule and once again make forced arbitration the industry standard.

* * *

With delicious irony, the American Health Care Assn., a leading nursing-home industry group, filed a lawsuit last fall challenging the federal government’s authority to tell the industry it can’t block people from filing lawsuits.

Werner & Peterson Op-ed: Wells Fargo case shows how fine print can erode freedom

Here.  Excerpt:

On June 7, a Utah judge will decide whether more than 50 consumers defrauded by banking giant Wells Fargo in its fake account scandal will be forced to pursue claims one by one in a secret arbitration system. Even as the bank’s PR machine loudly trumpets a focus on restoring consumer trust, Wells Fargo is insisting once again that defrauded customers should be barred from having their day in court.

* * *

A recent report from the nonprofit Level Playing Field found just 215 Wells Fargo customers pursued claims against the bank in arbitration since 2009, despite millions of fake accounts exposed by the CFPB. Looking at the numbers, it is not surprising so few consumers file. Of the 48 cases that advanced to a final hearing, only seven consumers in eight years received a dime from Wells Fargo with the bank paying out just $349,549. Indeed, consumers paid more restitution to Wells Fargo in arbitration than the other way around.

 

Bloomberg's Perry Cooper's Thorough Report on the Status of Various Arbitration Rules

Here.  Excerpt on the CFPB's proposed arbitration reg:

[Ballard Spahr's] Alan S. Kaplinsky told Bloomberg BNA that “it would be bordering on reckless” for CFPB Director Richard Cordray to finalize the rule because of the risk it will be overturned under the [Congressional Review Act].* * *

Congressional Republicans will be in lock step against it, he predicted. “The forces behind an override will be very very strong.”

But consumer advocate [Public Justic's] F. Paul Bland * * * called fears about CRA reversal “a recipe for paralysis.” “You miss all the shots you don’t take,” he said.

He pointed to the Wells Fargo fake account scandal, which snowballed to affect two million customers because mandatory arbitration shut down two early suits. Negative attention on Wells Fargo makes reversing the CFPB a “very hard vote for a lot of Republicans” in Congress, he told Bloomberg BNA.

* * *

[Rutgers Professor David] Noll suggested that Cordray is taking Congress’s temperature and might be waiting to release the rule until congressional support for the administration splinters further